Delivering a Smart System - Response to a Consultation on Smart Meter Policy Framework Post-2020 - Gov.uk
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Delivering a Smart System Response to a Consultation on Smart Meter Policy Framework Post-2020 June 2020
© Crown copyright 2020
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated.
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copyright holders concerned.
Any enquiries regarding this publication should be sent to us at:
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2Delivering a Smart System
Contents
Executive Summary _________________________________________________________ 5
Introduction _______________________________________________________________ 9
Policy context ____________________________________________________________ 9
A Market-Wide Rollout ____________________________________________________ 11
Consultation events ______________________________________________________ 12
Consultation Responses ___________________________________________________ 13
A Post-2020 Framework Proposal _____________________________________________ 16
Question 1 _____________________________________________________________ 18
Summary of responses to Question 1 _______________________________________ 18
Government response to Question 1 _______________________________________ 20
Question 2 _____________________________________________________________ 22
Summary of responses to Question 2 _______________________________________ 22
Government response to Question 2 _______________________________________ 23
Question 3 _____________________________________________________________ 24
Summary of responses to Question 3 _______________________________________ 24
Government response to Question 3 _______________________________________ 25
Question 6 _____________________________________________________________ 26
Summary of responses to Question 6 _______________________________________ 26
Government response to Questions 2, 3 and 6________________________________ 27
Question 4 _____________________________________________________________ 38
Summary of responses to Question 4 _______________________________________ 38
Government response to Question 4 _______________________________________ 40
Question 5 _____________________________________________________________ 41
Summary of responses to Question 5 _______________________________________ 41
Government response to Questions 4 and 5__________________________________ 42
Question 7 _____________________________________________________________ 45
Summary of responses to Question 7 _______________________________________ 45
Government Response to Question 7 _______________________________________ 47
Question 8 _____________________________________________________________ 50
Summary of responses to Question 8 _______________________________________ 50
Government response to Question 8 _______________________________________ 51
Question 9 _____________________________________________________________ 55
Summary of responses to Question 9 _______________________________________ 55
Government Response to Question 9 _______________________________________ 56
3Delivering a Smart System
Question 10 ____________________________________________________________ 59
Summary of responses to Question 10 ______________________________________ 59
Government response to Question 10 ______________________________________ 60
Question 11 ____________________________________________________________ 62
Summary of responses to Question 11 ______________________________________ 62
Government response to Question 11 ______________________________________ 63
Question 12 ____________________________________________________________ 64
Summary of responses to Question 12 ______________________________________ 64
Government response to Question 12 ______________________________________ 64
Data Communications Company (DCC) Charging _________________________________ 66
Co-ordinated Consumer Engagement Activities___________________________________ 68
Question 15 ____________________________________________________________ 68
Summary of responses to Question 15 ______________________________________ 68
Government response to Question 15 ______________________________________ 70
Embedding Consumer Behaviour Change _______________________________________ 73
Question 16 ____________________________________________________________ 73
Summary of responses to Question 16 ______________________________________ 73
Government response to Question 16 ______________________________________ 74
Other Policy Incentives _____________________________________________________ 77
Question 17 ____________________________________________________________ 77
Summary of Responses to Question 17 _____________________________________ 77
Government response to Question 17 ______________________________________ 79
Summary of Annexes _______________________________________________________ 92
ANNEX A ________________________________________________________________ 93
List of Respondents ______________________________________________________ 93
4Delivering a Smart System
Executive Summary
1. Smart meters are a vital upgrade to our national energy infrastructure and underpin the
cost-effective delivery of Government’s net zero commitment. They are a critical tool in
modernising the way we all use energy and support the transformation of the retail
energy market, helping the system to work better for energy consumers. Millions of
consumers across Great Britain are already benefitting from smart meters and the
overwhelming majority are having a good experience.
2. Under the current smart meter regulatory framework, energy suppliers have an
obligation to take “All Reasonable Steps” (ARS) to install smart meters in all homes and
small businesses by the end of 2020. This has already delivered over 20 million smart
meter installations and has laid a strong foundation for an enduring smart system. The
smart meter rollout has driven significant investment and employment – with a field force
of around 8,000 installers, and many thousands more jobs across the supply chain and
national communications infrastructure providers. Completing the rollout of around
50 million gas and electricity smart meters will sustain significant employment
opportunities in the years ahead and play an important part in a clean economic
recovery.
3. In Autumn 2019, the Government consulted on the introduction of a new regulatory
framework for energy suppliers beyond 2020, when the current ARS obligation comes to
an end. BEIS received 60 responses to this consultation from a variety of stakeholders
ranging from large energy suppliers and trade associations, to businesses in the supply
chain, consumer groups and individuals with an interest in energy and consumer policy.
Overall, the responses were supportive of a continuing obligation on energy suppliers to
rollout smart meters beyond 2020. There were mixed views as to the form and design of
such an obligation, including what it could achieve over the proposed four-year
timeframe. There was widespread support for Government to introduce policy measures
to support consumer uptake, and for Smart Energy GB to continue to coordinate
consumer engagement on behalf of energy suppliers.
4. Over the past three months, COVID-19 has had a significant impact on the way energy
suppliers operate. In line with Government and Ofgem guidance, energy suppliers are
making the operational decisions that best protect their customers and workforce. From
mid-March, energy suppliers have focused on essential and emergency metering work
and supporting those in vulnerable circumstances in the communities they serve. The
Government has been working with energy suppliers to re-mobilise the rollout of smart
meters, further to guidance published on 11 May 2020 on working safely in people’s
homes during COVID-19. Government wants to provide certainty on the regulatory
framework so that the rollout can regain its momentum as this remobilisation takes
place.
5. The final policy decisions set out in this document reflect the responses to the
consultation, as well as Government’s wider strategic aims in meeting its net zero
commitment and addressing the economic impact of COVID-19.
5Delivering a Smart System
A short-term extension of All Reasonable Steps
6. Government has decided to extend the existing ARS obligation that was due to expire
on 31 December 2020 by six months to 30 June 2021. This is to take account of the
short-term uncertainty for energy suppliers during these unprecedented circumstances,
and enable energy suppliers to return to installing smart meters at volume as COVID-19
restrictions ease.
Implementing a four-year framework
7. After the extension to the existing obligation, Government has decided to implement a
four-year framework to reach market-wide coverage of smart meters. This new
Framework will begin on the day after the existing obligation ends and will be applicable
to all domestic and non-domestic energy suppliers in line with the existing obligation.
Annual installation targets for each energy supplier will be set on a trajectory towards
market-wide rollout subject to an annual tolerance level. Government expects to consult
in autumn 2020 on the annual tolerance levels associated with the new Framework.
Under the new Framework each energy supplier will be recognised for all the
installations of smart meters that they achieve in any rollout year. Annual installation
targets will then be reset at the start of the subsequent rollout year, again on a trajectory
towards market-wide rollout. Further details on the design of the new Framework are
given in the consultation response.
8. Government intends to review the tolerance levels once during the four-year framework
period. This review is expected to take place during the second year of the new rollout
framework such that its outcomes can be implemented ahead of the third and fourth
rollout years.
9. Government has laid amending regulations in Parliament in line with the procedure
under section 89 of the Energy Act 2008, including consequential changes to licence
conditions as a result of changing the 31 December 2020 date.
Coordinating consumer engagement
10. Government has concluded that Smart Energy GB will continue as the body responsible
for leading coordinated consumer engagement activities on behalf of energy suppliers
during the smart meter rollout. Alongside this response, Government is publishing a
further consultation on proposals to strengthen Smart Energy GB’s governance
framework, revise its funding model and update its objectives to support the next phase
of the rollout.
Embedding consumer benefits
11. Government will continue to prioritise the realisation of consumer benefits from smart
metering and support innovation which improves consumer experience. Any further
policy changes will be informed by our ongoing monitoring of evidence of consumer
experiences, including specifically vulnerable and prepayment consumers, and
emerging innovations that use smart meter data.
6Delivering a Smart System
Supporting consumer uptake through policy measures
12. Government is committed to supporting the consumer uptake of smart meters. We will
work with Smart Energy GB and other partners to develop targeted and more tailored
engagement with specific consumer groups, such as vulnerable consumers or those
who are harder to reach. We intend to consult on strengthening the rights of tenants to
request a smart meter and are working with relevant stakeholders to develop improved
guidance to developers on making provision for smart metering equipment. We will also
consider further actions to ensure the benefits of smart meters can by fully realised
across Government policy on energy efficiency, electric vehicles, microgeneration, and
the future of heating.
13. Government has also considered the strongly held views of some stakeholders that the
new Framework is not achievable unless consumers’ current rights to refuse smart
meters are made more restrictive. Government considers consumer choice to be
fundamental to successfully delivering the benefits of the smart meter rollout and we
intend to retain it in the new Framework. We continue to believe that consumer support
for the Smart Programme should be predicated on as much consumer discretion as
possible, whilst recognising that it is better for all consumers to move as fast as possible
to a smart energy system, with better service, lower cost, wider choice of smart tariffs,
and propositions that support a cost effective transition to net zero.
14. A key aim of the Programme is ensuring that customers have full access to the wide
range of benefits offered by smart meters. The quality of energy suppliers’ customer
journeys throughout the booking and installation process is of paramount importance to
ensure consumers remain protected and derive maximum benefit in any future
Framework. Forcing consumers to accept a smart meter may negatively affect the
consumer journey and lead to these benefits not being realised. Government-led
benchmarking with energy suppliers in 2019 on the maturity of their consumer
engagement and operational fulfilment showed significant variability between their
performance across the consumer journey. All energy suppliers can and should do more
to remove friction from the consumer journey to drive the uptake of smart meters.
15. Government acknowledges that the choices faced by consumers are changing and will
likely continue to change through the next phase of the rollout as smart meters are
normalised as the default meter offer. For example, the cheapest tariffs in the market
are often linked to having a smart meter, reflecting that consumers with smart meters
cost less to serve. The manufacture of traditional meters is also ending as part of the
global transition to smart metering.
16. On this basis, we will only consider removing consumer choice in very specific
circumstances and where it is justified following consultation. For example, we intend to
bring forward proposals to remove consumer choice where energy theft has taken
place.
17. Once energy suppliers have made sustained progress in improving operational
performance and delivering consistent consumer journeys, Government intends to
consider other measures such as mandating smart meter installations for replacement
connections where a meter reaches the end of its operational lifetime. We consider
these actions will continue to normalise smart meters, support energy suppliers to
achieve their obligations under the existing obligation and the new Framework, and
deliver the benefits of the smart metering Programme.
7Delivering a Smart System
Conclusion
The new regulatory framework means the rollout of smart meters will continue to
improve the lives of energy consumers and deliver a good return for Great Britain.
With smart meters enabling consumers to better manage their energy use, and
prepayment customers to top up from home, COVID-19 has shown how vital this
national infrastructure upgrade is to the future of our energy system and our
country.
As we emerge from the pandemic, innovative products and services that rely on
smart metering, such as tariffs that reward consumers for using energy when
cheap, renewable generation is available, will be more important than ever. Smart
meters have a crucial role to play in our clean recovery, ensuring cost-effective
progress towards our net zero commitment in the next five years and for
generations to come.
8Delivering a Smart System
Introduction
Policy context
18. Smart meters are a vital upgrade to our national energy infrastructure, providing the
building blocks of a more flexible and resilient energy system fit for the 21st Century.
They are a critical tool in modernising the way we all use energy and aiding the
transformation of the retail energy market, so it works better for energy consumers. This
will play a key role in decarbonising the energy sector, helping us to deliver on our
long-term target of net zero greenhouse gas emissions by 2050. It will also help us
deliver on our commitment to maximise the economic opportunity of both the domestic
and global shift to clean growth. We are determined that the UK will play a leading role
in providing the technologies, innovation, goods, and services that will be needed to
underpin this transition. The 2019 cost-benefit analysis (CBA) published in September
2019 shows that the Programme will continue to deliver significant benefits for
households and small businesses in Great Britain, with a total Net Present Value (NPV)
of £6bn over the appraisal period.
19. The Smart Metering Implementation Programme (“the Programme”) has driven
significant investment and employment opportunities to date. For example, a significant
field force within the energy sector of around 8,000 installers has been created, with
many thousands more jobs across the supply chain and national communications
infrastructure providers. On this basis, the Programme has been an important
contributor to the national economy supporting around 15,000 jobs across Great
Britain, 1 and over 99% of the funding coming from the private sector and annual
investment running at c.£1bn. Completing the Programme will, therefore, sustain
significant employment opportunities in the coming years. We recognise that the
conditions created by COVID-19 have been difficult for energy suppliers. From mid-
March, energy suppliers have focused on essential and emergency metering work, and
supporting those in vulnerable circumstances in the communities they serve. The
Government has been working with energy suppliers to re-mobilise the rollout of smart
meters, further to guidance published on 11 May 2020 on working safely in people’s
homes during COVID-19. Without certainty about the Government’s post-2020 policy,
the rollout is at risk of losing momentum in early 2021. It is also important that we avoid
a hiatus given the disruption caused by COVID-19. The right incentives for energy
suppliers will be critical to drive billions of pounds of infrastructure investment during the
post-COVID-19 recovery period.
20. Under the current smart meter regulatory framework, energy suppliers have an
obligation to take “All Reasonable Steps” (ARS) to install smart meters in all domestic
and small business premises by the end of 2020. As at the end of March 2020, there
were 21.5 million smart and advanced meters in homes and small businesses across
Great Britain, 2 setting a strong foundation for an enduring smart system and helping to
spur innovation, while allowing consumers to take control of their energy consumption.
21. Smart meters are enabling energy suppliers to offer new products and services,
including smart tariffs that allow consumers to save money by using energy away from
1 Information collected through industry data sources.
2 https://www.gov.uk/government/statistics/smart-meters-in-great-britain-quarterly-update-march-2020
9Delivering a Smart System
peak times or when cheap, renewable generation is available. For example, some
customers have even been paid to use electricity during windy days when there was
excess clean energy in the system. The Smart Systems and Flexibility Plan, 3 published
jointly by Government and Ofgem in 2017 (and Progress Update in 2018), which set
out a number of actions that we are taking to enable smart homes.
22. Progress on the delivery of the Programme has been achieved through cross-industry
effort and investment by energy suppliers, their supply chains, third-party service
providers, and in particular the installer workforces. Supported by the work of Smart
Energy GB, 95% of people across Great Britain are now aware of smart meters. 4
23. Second generation (SMETS2) smart meter installations continue to ramp up with daily
installations of 18,000-19,000 (prior to COVID-19 disruption). As at end of March 2020,
a total of over 4.3 million 5 domestic SMETS2 smart meters were connected to the
national smart metering communications network run by the Data Communications
Company (DCC). Migration of first generation (SMETS1) meters into the national
infrastructure began in 2019 and will continue, allowing energy suppliers to restore
smart services to those customers who have lost them and enable them to retain
services upon change of supplier. SMETS2 meters are now regarded as the default
meter in the majority of smart meter installations, supporting meter interoperability,
which is key to the realisation of consumer and energy system benefits.
24. Smart meters offer a better consumer experience than traditional meters. The provision
of In-Home Displays (IHD) as part of the installation process gives customers with smart
meters accurate, accessible, and near real-time consumption and price information. This
enables them to make changes to their energy use and save money on bills. Customers
who agree to have smart meters installed can also now access some of the cheapest
tariffs on the market, reflecting the fact that consumers with smart meters are costing
energy suppliers less to serve. COVID-19 has brought the consumer benefits for
millions of households with smart meters into sharp focus, particularly for prepayment
customers who can track and top-up credit without leaving home. Energy suppliers can
also see when prepayment customers have gone off supply, allowing them to offer
timely support, and switch meters into credit mode remotely if necessary. Given the
obvious benefits and improvement in customer experience, we will continue to work with
energy suppliers and consumer groups to accelerate, where possible, the rollout of
smart meters to pre-payment customers.
25. Consumers who may be more vulnerable can benefit from smart meters in several
ways. Where available, low credit and high consumption alerts can be shown on the
IHD, which can also be used to activate emergency credit. Smart meters are also
providing energy suppliers with opportunities to offer support to consumers who may be
in more challenging financial situations or prone to self-disconnection. Where
appropriate, data from smart meters may also help energy suppliers to identify
customers who could benefit from targeted support, enabling earlier intervention to
engage the customer and reduce the risk of debt build-up or repeated
self-disconnection.
3 https://www.gov.uk/government/publications/upgrading-our-energy-system-smart-systems-and-flexibility-plan
4 https://www.smartenergygb.org/en/-/media/SmartEnergy/essential-documents/essential-documents/english/Outlook-March-
2020.ashx
5 https://www.gov.uk/government/collections/smart-meters-statistics
10Delivering a Smart System
26. Millions of energy consumers are already benefitting from smart meters 6 which is
testament to the hard work, skills, and dedication of all the organisations involved in
delivering the rollout. Research suggests that the overwhelming majority of consumers
are having a good experience:
• 80% of people with smart meters say they have a better idea of their energy costs7;
• 88% of prepayment customers with smart meters say that topping up has become
easier since getting their smart meter; 8 and
• 9 in 10 people were satisfied with their smart meter installation. 9
27. However, we recognise that without regulatory certainty beyond 2020, the rollout is at
risk of losing momentum in early 2021, with consequential impacts on ambitions for a
smart energy system and the delivery of wider infrastructure and environmental benefits.
A Market-Wide Rollout
28. By the end of the rollout, the Programme aims to upgrade around 50 million gas and
electricity meters in homes and small businesses. With consumers at the heart of Great
Britain’s rollout, the emphasis throughout has been to take the time necessary to ensure
thorough testing of systems and equipment so that consumers have a positive
experience from the outset.
29. Over the duration of the Programme to date, the energy retail market has been dynamic
and continues to change rapidly, with new energy suppliers emerging and more choice
for consumers. The smart meter rollout therefore needs a regulatory framework beyond
2020 that is adapted to these evolving market conditions, while at the same time
continuing to deliver a positive consumer experience. The Government has already
implemented measures to normalise smart metering as the default meter offer in Great
Britain with the mandate on all energy suppliers to become DCC Users 10, which is a key
tool to deliver interoperability across the sector, and the activation of the New and
Replacement Obligation (NRO) in June 2019. 11
30. We are making substantial progress. During 2019, 4.5 million meters were installed, and
this continued into the first months of 2020 with a weekly average in excess of 95,000
installations. We are working closely with energy suppliers and Ofgem to remobilise
smart meter installations in line with public health advice, and support and expedite
energy supplier preparations for scaling operations back up. We want to ensure that the
rollout continues with this positive momentum after the end of 2020 when the current
regulatory framework ends. This is even more important in light of the impact of
COVID-19.
31. On 16 September 2019, the Government consulted 12 on the introduction of a
new regulatory framework for energy suppliers, building on the 2020 commitment whilst
6 https://www.smartenergygb.org/en/-/media/SmartEnergy/essential-documents/essential-documents/english/Outlook-March-
2020.ashx
7 Smart Energy GB, Smart Energy Outlook: September 2019.
8 BEIS, Smart Meter Customer Experience Study 2017.
9 ibid
10 SEC section H1.11. All domestic suppliers are subject to the requirement to become a DCC User by 25 November 2017.
Non-domestic premises were required to become DCC Users by 31 August 2018
11 https://smartenergycodecompany.co.uk/latest-news/government-response-to-january-2019-consultation-on-the-new-and-
replacement-obligation-nro-activation-date/
12 https://www.gov.uk/government/consultations/smart-meter-policy-framework-post-2020
11Delivering a Smart System
driving the ambition to complete the smart meter rollout as soon as practicable. The
proposed market-wide obligation was based on the following design principles:
• To encourage consumers to benefit from the rollout of smart meters, including the
data from their smart meters;
• To deliver a market-wide rollout of smart meters as soon as practicable, in a way
that ensures value for money, and maintains installation quality so that consumers
have a good experience;
• To normalise smart meters so they are the default meter used in Great Britain; and
• To give certainty to the whole sector to invest and plan, ahead of and beyond
2020.
Consultation events
32. BEIS conducted 20 engagement events during October and November 2019 to support
this consultation. These events included meetings and workshops with suppliers, energy
supply chain companies and consumer groups.
33. All these events were designed to help attendees explore and understand the
implications of the consultation proposals whilst helping Government to obtain feedback
from industry on the proposals, and to support participants in developing their own
responses to the consultation.
34. Whilst the feedback received during the events complemented the consultation, any
comments received were not taken as formal responses and therefore have not been
treated as such. All the attendees at these meetings and workshops were encouraged
to submit formal responses to the consultation. However, in the development of policy
thinking, the Government has also considered and reflected on key themes discussed at
these events and these are reflected in the final response set out in this document. A
summary of post publication consultation engagement events that took place is provided
in Table 1 below.
12Delivering a Smart System
Table 1: Post publication engagement
Date Company Name Organisation Type
19/09/2019 Electricity North West Distribution Network Operator (DNO)
20/09/2019 Foresight Metering Ltd Meter Asset Provider (MAP)
24/09/2019 Energy UK Trade Body (Energy Suppliers)
24/09/2019 Chameleon Technology Other Private Sector
25/09/2019 Calvin Capital Ltd Meter Asset Providers (MAPs)
27/09/2019 National Skills Academy Meter Operators (MOP)
for Power (NSAP) training/accreditation
01/10/2019 Energy Networks Distribution Network Operators (DNO)
Association (ENA)
01/10/2019 EUK & Energy Suppliers Energy Suppliers
02/10/2019 Smart Energy GB Delivery Partner
03/10/2019 Community of Meter Asset MAPs
Providers (CMAP)
08/10/2019 Industrial and Commercial Trade Body (Non-Domestic Energy
Shippers and Suppliers Suppliers)
(ICOSS)
16/10/2019 Citizens Advice Consumer Group
17/10/2019 Drax (Opus and Haven) Energy Supplier
23/10/2019 British Gas Energy Supplier
29/10/2019 E.ON Energy Supplier
29/10/2019 National Energy Action Consumer Group
30/10/2019 OVO Energy Supplier
23/10/2019 Stark Other Private Sector
06/11/2019 EDF Energy Supplier
Consultation Responses
36. The consultation closed on 11 November 2019. There were 60 responses to the
consultation in total. Respondents were broken down into 9 categories: Energy Supplier;
Trade Body; Individuals; DNOs; Academia and the Third Sector; Delivery Partner;
MOPs/MAPs; Consumer Group; and Other. A list of respondents can be found in Annex
A. Table 2 below shows a summary of respondents by organisation type.
13Delivering a Smart System
Table 2: Summary of respondents by organisation type
Number of Percentage of Total
Organisation Type
Respondents (rounded up)
Energy Supplier 20 33%
Trade Body 7 12%
Distribution Network Operator (DNOs) / 4 7%
Gas Distribution Networks (GDNs)
Consumer Group 4 7%
Meter Operators (MOPs) and Map Asset 4 7%
Providers (MAPs)
Academia / Third Sector 1 2%
Delivery partner 3 5%
Other 11 18%
Individual (member of the public) 6 10%
Total 60 100%
37. In the following sections, we set out a high-level summary of these consultation
responses and the UK Government’s response to these. Section 1 covers Questions 1-
12 and Section 2 covers questions 15-17. Questions 13-14 related to proposed
amendments to the DCC charging methodology and were originally included as part of
Section 2 of the consultation. The Government published its conclusions on these
proposals in March 2020 13 and they are therefore not discussed further in this
document.
38. Summaries of the responses received as part of the consultation process have been
included for each individual question. The Government response to the following
questions are discussed together:
• Questions 2, 3 and 6; and
• Questions 4 and 5
39. In this document:
• “the Government” refers to the UK Government;
• “we” refers to the UK Government;
13See: https://smartenergycodecompany.co.uk/latest-news/beis-government-response-to-consultation-on-code-and-licence-
changes/
14Delivering a Smart System
• “BEIS” or “the Department” refer to the Department for Business, Energy and
Industrial Strategy, that has published the response to the consultation on behalf of
the UK Government.
• “the Programme” refers to the Smart Metering Implementation Programme, which
will include the Department’s Smart Meter Team and the wider group of partners
and stakeholders responsible for delivering the rollout.
• “the existing all reasonable steps (ARS) obligation” or “the existing obligation”
refers to the legal obligation on energy suppliers to take “all reasonable steps”
(ARS) to install smart meters. This obligation initially required installations to take
place by the end of 2019 and, in 2013, it was extended to the end of 2020 (“the
2020 rollout duty”).
• “the new Policy Framework”, “the new Framework”, “the new obligation” and “the
post-2020 obligation” refer to the smart meter obligation which will be implemented
and is intended to take effect following the expiration of the “all reasonable steps
(ARS) 14 obligation” including any extension.
• “the regulator” refers to Ofgem, the Government regulator for gas and electricity
markets in Great Britain.
• “COVID-19”, or “COVID” refers to the “coronavirus (COVID-19) pandemic”
14 Electricity Supply Licence SLC 39 and Gas Supply Licence SLC 33
15Delivering a Smart System
A Post-2020 Framework Proposal
40. This section summarises and addresses the responses received in relation to Questions
1-12 as set out in the consultation document published on 16 September 2019.
QUESTIONS
POST-2020 FRAMEWORK PROPOSAL
Q1 Do you agree that there is a need for an overarching obligation for energy suppliers to
continue the rollout of smart meters, in addition to the New and Replacement
Obligation (NRO)? Please give reasons for your answer.
Q2 Do you agree with our conclusion that extending the existing “ARS” obligation would
not deliver market-wide rollout in a timely manner consistent with wider Government
objectives, in particular the long-term ambition of net zero greenhouse gas emissions
by 2050? Please give reasons for your answer.
Q3 The obligation proposes a monitoring framework with binding pre-set annual
milestones for four years (from 2021 to 2024). Do you agree with this time period? If
not, we would welcome your views on alternative time periods. Please provide
evidence to support your answer.
Q4 Do you agree with our assessment that an 85% minimum coverage at the end of the
framework period is achievable? Please provide evidence to support your answer.
Q5 Do you agree with the application of permitted tolerance in stages, growing in a
straight line to the final year of the monitoring framework? We would welcome your
views on alternative methods to apply tolerance around the annual milestones. Please
support your answer with relevant information.
Q6 Do you agree that pre-defined annual milestones will facilitate the progress towards
rollout completion? Please give reasons for your answer.
Q7 Do you agree with the proposal that “customer churn” – arising from consumers
switching energy suppliers- should be accounted in energy suppliers’ pre-set annual
milestones? Please give reasons for your answer.
Q8 Do you agree with the proposal that any post-2020 obligation should be applied to all
energy suppliers regardless of size and date of entry into the market? Please give
reasons for your answer.
16Delivering a Smart System
Q9 Do you agree with the proposal of a mid-point review to revisit tolerance levels within
the monitoring framework period in line with market conditions?
a. If the answer is yes, when do you think will be the best time for this review?
b. If the answer is no, please explain why not.
LEGAL TEXT
Q10 Do you agree that the legal drafting in Annex 1 implements the policy intention
proposed in this consultation? Please give reasons for your answer.
Q11 Do you agree with the legal drafting in Annex 2 in relation to the post-2020 reporting
requirements on rollout information to be provided to the Secretary of State?
Please give reasons for your answer.
Q12 Do you agree with the legal drafting in Annex 6 setting out proposed consequential
changes to existing licence conditions as a result of the previous amendments?
Please give reasons for your answer.
17Delivering a Smart System
Question 1
Do you agree that there is a need for an overarching obligation for energy
suppliers to continue the rollout of smart meters, in addition to the New and
Replacement Obligation (NRO)? Please give reasons for your answer.
Summary of responses to Question 1
A summary of responses is provided in the table below.
Disagree
Agree with
Agree Neutral with Disagree No response TOTAL
caveats
caveats
27 19 0 2 5 7 60
41. A majority of respondents to this question either agreed or agreed with caveats that
there should be an overarching obligation for energy suppliers to continue the rollout of
smart meters beyond 2020, in addition to the NRO. This includes most energy suppliers.
42. The main reasons given by those who agreed with the proposition were that it would
maintain the momentum of the rollout Programme (whereas relying on the NRO alone
would not deliver a timely conclusion to the Programme); and it would help ensure the
consumer and energy system benefits of smart metering, in particular those relating to
the Government’s net zero goal, and the move to a smart, flexible energy system, are
delivered.
43. Several respondents who agreed also noted that an overarching obligation is necessary
as it would help ensure that less engaged and vulnerable consumers could benefit from
smart meters in a timely manner. One of these respondents flagged that some groups of
consumers will require targeted help and support to get smart meters installed, whereas
relying solely on the NRO would not give these consumers the support they need.
44. Some respondents who agreed noted that an overarching obligation would provide
clarity and certainty to help energy suppliers develop their own plans for rolling out
smart meters. On a related point, a number of respondents who agreed felt that an
overarching obligation would be beneficial to other market participants, by giving greater
certainty for stakeholders such as manufacturers and installation service providers.
45. Several respondents who agreed with caveats, strongly opposed a hard obligation on
suppliers to install without an associated new obligation on consumers to accept a smart
meter, as opposed to the current non-mandatory position. Some suggested that such an
obligation could be introduced later in the rollout, but that this would need to be clearly
signalled by the Government.
46. Some respondents considered that it was premature to move away from the current
ARS obligation approach, particularly in the context of what they saw as relatively low
18Delivering a Smart System
consumer appetite for smart meters. A number of respondents felt that there was more
Government could do to align smart metering and other energy related policy measures,
in order to increase consumers’ awareness of smart metering and help address the lack
of engagement with their energy suppliers.
47. Two respondents considered that specific lessons from the rollout to date should be
taken into account in designing any new Framework, with one respondent specifically
referring to the challenge of persuading consumers who have so far resisted smart
meters to accept them in future.
48. Respondents who disagreed with the proposals with caveats made the following points:
• One respondent considered a better approach would be to ensure smart meters
are installed at the end of a traditional meter’s life. They acknowledged that this
would mean it would take longer to achieve market penetration, but considered it
would be better from a consumer perspective as it would remove behaviours that
do not put the consumer first (for example, what they described as aggressive
practices by some energy suppliers to their meet installation targets); and
• The other respondent agreed that an overarching obligation is needed alongside
the NRO but did not consider the proposed approach was justified or workable. In
particular, they thought that the Government has not justified the move away from
the ARS obligation approach or shown how 85% penetration is achievable in the
context of weak consumer demand. They also did not consider that the impact of
the default tariff cap had been accounted for in underlying assumptions.
49. One respondent who disagreed with the proposals considered that:
• Any post-2020 framework should:
• Recognise that successful delivery of the Programme requires co-ordinated
effort from a range of stakeholders, not just energy suppliers; and
• Be accompanied by additional policy measures, in particular those which
address the challenges of consumer engagement in light of the current voluntary
nature of the Programme.
• An overarching obligation on energy suppliers would be unlikely to be in
consumers’ best interests as it could lead to poor customer experience and
excessive costs, as suppliers seek to mitigate the regulatory risks they would be
exposed to.
50. Points made by other respondents who disagreed with the proposals included the
following:
• Further analysis of whether the benefits of smart meters are being realised is
needed prior to determining whether the Programme should be continued, modified
or stopped; and
• Not all consumers will want a smart meter which means that it is better not to
attempt a ‘hard sell’ as this could be counter-productive.
19Delivering a Smart System
Government response to Question 1
51. Overall, there was broad support from respondents for an ongoing obligation on energy
suppliers to continue the smart meter rollout when the current obligations expire at the
end of 2020, however views on our specific proposal were mixed.
52. In the responses, there was also recognition of the importance of smart meters in the
delivery of energy system benefits and as fundamental enablers of energy
decarbonisation, helping us to deliver our long-term target of net zero greenhouse gas
emissions by 2050.
53. Indeed, millions of households and small businesses are already benefitting from smart
meters, putting them in control of their energy use and helping them reduce their bills,
whilst supporting the transition to a more flexible and efficient energy system. Without
the flexibility enabled by smart meters, modelling for the Committee on Climate Change
estimates the costs of delivering net zero emissions by 2050 could be up to £16 billion
higher each year. 15
54. Most respondents agreed that an overarching obligation on energy suppliers to continue
to rollout smart meters is necessary to provide them, and the supply chain in general,
with clarity and certainty to inform their operational planning going forward. We agree
that this will maintain the momentum of the rollout and ensure a timely conclusion of the
Programme and the realisation of consumer benefits.
55. The respondents who agreed that an overarching obligation is needed but did not agree
with our proposal argued that it was premature to move away from the current ARS
approach. They cited the need for continuing regulatory flexibility, particularly in the
context of what they viewed as relatively low consumer appetite for smart meters. They
also called for further coordination within Government to align smart metering with other
policy measures and increase consumers’ awareness. Both issues have been
addressed elsewhere in this document. Please see responses to Question 2, 3 and 6
(pages 22 to 37) and Question 17 (pages 78 to 92).
56. In response to the specific suggestion that further analysis of the realisation of benefits
would be required before determining whether the Programme should be continued (and
if so, in what form), we would refer to the latest Programme Cost Benefit Analysis16
which was published in September 2019 alongside the consultation. This showed that
after all costs, the smart meter rollout is set to deliver a £6 billion net benefit to the
country and so remains a good investment for Great Britain.
57. Among the respondents disagreeing with our proposal of an overarching obligation,
three raised various other concerns related to the potential impact on consumers,
including potential pressure from energy suppliers to accept smart meters thus
damaging the consumer journey.
58. In answer to these concerns, the Government would like to emphasise that consumers
have always been at the heart of the smart meter rollout and continue to be so. Our
focus throughout the Programme has been to take the time necessary to ensure
thorough testing of systems and equipment so that consumers have a positive
experience from the outset. The Programme has put in place measures designed to
15 https://www.theccc.org.uk/wp-content/uploads/2019/05/Net-Zero-Technical-report-CCC.pdf
16https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/831716/smart-meter-roll-
out-cost-benefit-analysis-2019.pdf
20Delivering a Smart System
ensure that consumer interests are fully protected. These measures include a Smart
Meter Installation Code of Practice (SMICOP) covering the necessary steps required
before, during and after smart meter installations; and a Data Access and Privacy
Framework17, which sets out the purposes for which energy consumption data can be
collected and the choices that consumers have about access to their data. These
provisions will continue under our proposed new framework. We also continue to
proactively monitor consumer protection policy, to ensure appropriate safeguards are in
place, including for vulnerable and prepayment consumers.
Conclusion
After the expiration of the ARS obligation framework, and without the introduction
of a new Framework, the NRO will be the only ongoing obligation in place. This
would mean that energy suppliers will only be required to install smart meters at
new metering points and for meter replacements at end of meter life (subject to “all
reasonable steps”). Any additional installations beyond this minimum would be
optional, meaning that we could not be confident that the overall momentum of the
rollout will be maintained beyond the end of 2020. This would lead to a substantial
slowdown in the current smart meter installation rate and spread the remaining
transformation of the energy metering infrastructure over 20 years.
It is the Government’s view that solely relying on the NRO would be insufficient to
deliver a market-wide rollout in a timely way. Therefore, the Government concludes
that without the certainty of an obligation that supplements the NRO, the rollout
would be at risk of stalling in early 2021. This would significantly delay the point at
which a market-wide smart meter rollout is reached, putting at risk the delivery of
the Government’s net zero commitments, and the benefits of a smarter energy
system to industry, society, and consumers.
17 https://www.gov.uk/government/publications/smart-metering-implementation-Programme-review-of-the-data-access-and-
privacy-framework
21Delivering a Smart System
Question 2
Do you agree with our conclusion that extending the existing ‘ARS’ obligation
would not deliver market-wide rollout in a timely manner consistent with wider
Government objectives, in particular the long-term ambition of net zero
greenhouse gas emissions by 2050? Please give reasons for your answer.
Summary of responses to Question 2
A summary of responses is provided in the table below.
Agree
Disagree
Agree with Neutral Disagree No response TOTAL
with caveats
caveats
22 7 2 4 10 15 60
59. A majority of respondents agreed that the existing ARS obligation would not deliver a
market-wide rollout in a timely manner consistent with other Government objectives, and
especially to meet net zero targets. Many respondents welcomed the certainty that
targets would bring for industry and other partners delivering the rollout and considered
that specific annual targets are a better way to drive progress. Several respondents
noted that the arguable ambiguity of ARS risked inconsistent interpretations of
obligations across market participants. Those that caveated their agreements suggested
additional policy levers were needed and that pragmatism through a ‘reasonableness
test’ should be incorporated in the design of the new obligation. For instance, in the
context of setting annual installations targets these should be clear, binding and
deliverable.
60. However, around a third of respondents disagreed, including most energy suppliers with
several arguing that an ARS obligation remains appropriate for the next phase of the
rollout. Many of these also suggested that policy measures to support consumer uptake
should be introduced immediately.
61. Respondents raised a number of concerns including:
• That Government had not considered alternative approaches and had provided
insufficient evidence to justify the assumption that extending ARS would not
achieve a market-wide rollout;
• That remaining technical barriers to installations would not be resolved before the
implementation of a new Framework, requiring the Government to exercise a
degree of pragmatism. There were a wide range of opinions as to how quickly
these barriers would be addressed;
• Their view that consumer acceptance remains the key barrier to reaching market-
wide rollout rather than the format of the obligation. Several respondents cited
22Delivering a Smart System
Smart Energy GB research 18 indicating that only 32% of consumers would accept a
smart meter in the next six months. Some argued that if ARS were removed for
energy suppliers, then Government should also remove the current choice of
accepting a smart meter from consumers;
• That a change in approach would lead to energy suppliers incurring unreasonable
costs. Energy suppliers raised concerns that these would not be covered in the
default tariff cap;
• That consumer experience could be damaged if ARS were removed because it
could lead to consumers being unclear about whether they have the option to
accept installations or energy suppliers might resort to aggressive tactics, both of
which could reduce trust with consumers; and
• That setting annual installation targets discriminates against energy suppliers in
several ways. For example those that invested more resources at the early stages
of the rollout now have a higher proportion of harder to reach customers; smaller
energy suppliers would face an unjust burden; and/or those that serve exclusively
non-domestic consumers face different challenges and are at an earlier phase in
the rollout compared to the domestic market.
Government response to Question 2
62. This question has been addressed alongside Questions 3 and 6. Please see response
in pages 27 to 36.
18 Smart Energy GB, Smart Energy Outlook September 2019
23Delivering a Smart System
Question 3
The obligation proposes a monitoring framework with binding pre-set annual
milestones for four years. Do you agree with this time period? If not, we would
welcome your views on alternative time periods. Please provide evidence to
support your answer.
Summary of responses to Question 3
A summary of responses is provided in the table below.
Disagree
Agree with No
Agree Neutral with Disagree TOTAL
caveats response
caveats
20 12 0 7 12 9 60
63. A majority of respondents agreed that the proposed four-year monitoring framework with
annual milestones was an appropriate time period. They suggested that such a
framework would provide clarity to industry, support planning and encourage
collaboration to tackle more ‘difficult installations’ which may have been deferred to later
in the rollout. Those who caveated their agreement noted that the milestones need to be
achievable and expressed concern that the proposed annual installation targets were
too challenging. Respondents also noted that the framework should be flexible, for
instance so that it could be extended by a further period if necessary or to take account
of events outside energy suppliers’ control. There was concern among some consumer
group representatives that the proposed annual milestones could potentially create a
poor customer experience due to pressure to accept a smart meter being exerted on
consumers by their energy supplier.
64. Those who did not agree with the proposal, which included most energy supplier
respondents, argued that the end point of end-2024 is not achievable. Some did
acknowledge the benefits of annual assessments towards increasing the level of smart
meter coverage overall. Their concerns included:
• That the resolution of outstanding technical constraints would not be complete by
the end of 2020;
• That binding targets would be ineffective at changing consumer attitudes, which
they viewed as the key barrier to market-wide rollout; and
• That the proposal represented a more significant change in the compliance
framework for small and non-domestic energy suppliers, which would be difficult to
meet. This could be exacerbated for non-domestic consumers with large,
complicated customer portfolios where time lags can occur between agreeing that
installations can take place and the installations happening due to operational
reasons. If this installation journey were to span across delivery years, it may result
in energy suppliers being unfairly penalised.
24Delivering a Smart System
65. A trade body representing energy suppliers supplemented their response with an
independent report based on energy suppliers’ installation Programmes. This analysis
was based on the current trends in installation rates and suggested that industry could
achieve 56% - 68% coverage by end-2024 rather than the 85% assumed in the
consultation analysis.
66. A few respondents said that a longer timescale than 2024 is needed to achieve
market-wide rollout of smart meters. In contrast, two respondents argued the monitoring
framework should be shorter, for instance a three-year period instead, to prevent costs
increasing.
Government response to Question 3
67. This question has been considered alongside Questions 2 and 6. Please see response
in pages 27 to 36.
25Delivering a Smart System
Question 6
Do you agree that pre-defined annual milestones will facilitate the progress
towards rollout completion? Please give reasons for your answer.
Summary of responses to Question 6
A summary of responses is provided in the table below.
Disagree
Agree with
Agree Neutral with Disagree No response TOTAL
caveats
caveats
18 6 1 2 14 19 60
68. Most respondents who answered this question agreed that pre-defined annual
milestones will facilitate progress towards rollout completion. Many noted the
importance of milestones in maintaining momentum, providing certainty to the supply
chain, identifying and implementing best practice and facilitating lessons learned.
Respondents also said this provides strong signals to investors in the provision of
products and services connected to smart meters. Those that caveated their agreement
stated that milestones needed to be realistic. A distribution network company
respondent suggested that milestones be aggregated at individual DNO level to ensure
sufficient capacity is available to support installations in the relevant area.
69. A number of respondents, including most energy suppliers, did not agree with the
proposals. They disagreed with the principle of annual milestones that measure
progress towards an outcome that they consider to be unachievable, particularly on a
straight-line trajectory. Instead, many of these respondents suggested a continuation of
the existing ARS framework, within which they argued energy suppliers are already
required to maximise their efforts. Some stated that the proposed framework would not
encourage more installations because it does not address the significant engagement
challenges faced by energy suppliers. Others argued that the increasing number of
consumers switching energy suppliers could make achieving such milestones difficult.
70. Some respondents suggested that the proposed framework would lead to unintended
consequences that would be detrimental to consumers and distort competition. For
instance, this may be the case if suppliers with higher costs of compliance under the
new regime are unable to recover their costs, particularly where customers are subject
to the default tariff cap. Another example given was that annual milestones could be
more difficult for certain energy suppliers due to specific circumstances and challenges,
including the variation in current smart meter coverage levels.
71. Some of the non-domestic respondents suggested that if the proposals were
implemented, then Government should revise its policy position to allow all non-
domestic businesses, including microbusinesses, to be offered a choice between a
SMETS meter and an advanced meter.
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